The term revocable living trust typically refers to a trust that is created during the lifetime of a particular individual, according to the American Bar Association. At its essence, a revocable living trust is based on a legal instrument through which certain assets are transferred to the ownership of the trust itself.
A trustee is designated within the trust instrument itself. The trustee is the individual designated to manage the affairs of the trust on behalf of the beneficiary or beneficiaries. The trust instrument also identifies that individual or those individuals who are the beneficiaries of the trust. As the term suggests, a beneficiary is an individual who benefits from the trust. The creator of the trust can be a beneficiary of the trust. Successor beneficiaries can be designated who enjoy the benefits of the trust after the initial beneficiary dies.
A key element of a revocable living trust is that the creator is able to make changes to it during the course of his or her lifetime. The creator can change any of the specific terms included within the instrument. Indeed, if the creator so desires, he or she can eliminate the revocable living trust.
Probate and a Revocable Living Trust
One of the primary reasons for the creation of a revocable living trust is that it permits the probate process to be bypassed upon the death of the creator of the trust or the death of a trust beneficiary. Bypassing probate saves time and money in the final analysis.
Taxes and a Revocable Living Trust
What a revocable living trust does not do is permit tax avoidance. Although probate may be avoided with this type off trust, taxes must be paid as owed.
Revocable Living Trust Versus Irrevocable Living Trust
As the monikers associated with these two types of trusts indicate, revocability is the key distinction between these two types of trusts. The creator can terminate a revocable derivation. On the other hand, once a creator appropriately executes an irrevocable trust instrument, that trust generally cannot be altered or terminated.
A skilled, experienced Pennsylvania estate attorney can assist a person in deciding on whether or not a revocable living trust is a suitable estate planning structure. Typically, there is no charge for an initial consultation to discuss a revocable living trust.